Abstract

People by and large tend to postpone their present consumption for numerous reasons. This postponement of consumption leaves them with surplus money to invest for future consumption. Amongst the number of alternatives avenues present for such investments, gold too tends to be one of them. People around the world invest in gold though for many different reasons. Many people view gold as a reliable source of value in times of difficulty. Gold offers insurance against stock market failure. While at the same amongst the different purposes that require use of Gold, certainly include commodity uses. Even if viewed from the historical perspective of a multi-century time frame, no other investment has the wealth preserving power of gold. Other assets are dependent upon a certain government or political climate to retain value or appreciate, but gold is largely independent of political climate. The research design adopted for the completion of the study was of descriptive type. It describes the reasons that affect the prices of gold in world as well as domestic scenarios. The study leads to the conclusion that by keeping an eye on movement of ‘Basis and of market the importers and exporters’ can manage the four scenarios for both long/short hedgers. The hedger can do two things for minimizing the risk namely first being either can square off the position at the time where he can face minimum risk or can gain profit as bonus if he has no margin left in respect of time i.e. if he has to buy or sell the gold for fulfilling the commitments on or before the expiry date of his future contract only, or the next can be rolling over the position, if there is still some time in fulfilling the commitments i.e. can buy/sell another far month contract for minimizing the risk, according to the movement of Basis and market.